Speech by Former Secretary of State for the Environment, Owen Paterson MP, indicates the current political consensus on energy policy maybe be challenged.

Public and political debate is only likely to grow as inherent contradictions and unforeseen consequences of current policy become more apparent.

Current EU/UK energy policy is deeply flawed and utility companies and public market investors will be wary of committing further capital to support and deliver it.

Last night the former Secretary of State for the Environment, Owen Paterson MP, delivered the Annual Lecture to the Global Warming Policy Foundation. The speech has generated considerable press coverage. The full text can be seen here >>

In his speech Mr Paterson challenges the direction and basis of UK / EU energy policy. He states that current energy policy is failing to deliver the key goal of emission reduction whilst proving to be both un-affordable and a significant threat to security of supply. Mr Paterson recommended a change of course with a return to a more market based energy policy that would encourage technological innovation that in turn would reduce carbon emissions in a more affordable manner.

In practical terms Mr Paterson calls for the suspension / abolition of the Climate Change Act 2008 which provides the legal framework for current energy policy and puts into UK law various climate change targets, most notably the 2050 target to reduce greenhouse gases by 80% versus 1990. In order to secure affordable energy whilst reducing emissions Mr Paterson recommended that the UK focus R&D and investment in four areas; local shale gas, modular small scale nuclear, demand side management, and local combined heat and power.

Is the speech important for the Capital Markets?

The speech is the first time to our knowledge that a senior Conservative politician (recently in government) has called for a fundamental change of course on energy policy and explicitly for the abolition of the Climate Change Act. As the 2013 Energy Act is in effect an instrument to implement the Climate Change Act then the abolition of the latter would naturally lead to the abolition / revision of the former.

Mr Paterson's speech is an indication that the monolithic political consensus in favour of the UK's climate change driven energy policy is fraying somewhat. We are now seeing some recognition from politicians that current policy is struggling (to say the least) to satisfy the conflicting goals of reduced emissions, security of supply and affordability. For the public capital markets perhaps the only surprise is that it has taken so long for the political debate to begin.

However, Mr Paterson's speech is so far just an isolated event. As yet the political support for both the Climate Change Act and the Energy Act remains strong with all three of the main parties in favour.

The coming general election

Energy policy is likely to be an important issue in the forthcoming general election. It is likely in our view that all three main political parties will maintain their support for the current policy direction. Indeed, the Labour Party has stated that it intends to legislate, should it form the next government, to impose a 50g CO2 per KWh maximum carbon intensity for the power generation industry (compared to c.500g now) by 2030. Such a policy would re-enforce the existing targets.

The Liberal Democrats have of course held the energy brief in the current coalition government so are highly unlikely to signal a change of course. The Conservative party voted overwhelmingly in favour of both the Climate Change Act and the Energy Act and whilst Mr Paterson's speech indicates some growing dissent from within the party the chance of a radical shift in policy direction appear slim for now.

The Conservatives have indicated that, should they win a majority, that support for on-shore wind would be curtailed but have not suggested that they would move away from either the 2020 renewable target or the 2030 emission reduction target. However the rise of UKIP, who propose to abolish 'green levies' may force the Conservatives to a more sceptical stance on current policy, especially support for renewables.

The Liberum View

Mr Paterson's speech is worth noting by the capital markets as it indicates that the current political consensus on energy policy maybe be challenged going forward. In our view the public and political debate is only likely to grow as the inherent contradictions and unforeseen negative consequences of the current policy become more apparent as time goes on. We have long argued that current EU / UK energy policy is deeply flawed and that utility companies and public market investors should be wary of committing further capital to support and deliver it. Advice which has been increasingly accepted in recent times. After all, an energy policy that has the Hinkley Point C contract and off-shore wind as its two flagship achievements must eventually collapse under the weight of its own idiocy.

Click on the video below to hear Peter talk about energy policy in the run-up to the UK general election in May 2012 (shot before the Scottish referendum, which he mentions).

In an eight-page PowerPoint, Charlie puts into context stock market anxiety about residential RMI, flagging that mortgage approvals have been ahead in six of the eight months in 2014 to date and are up 15% overall.

Activity in July 2014 was a post-crisis high and “we are also encouraged by the recent Credit Conditions Survey which showed banks expecting to increase mortgage supply in the fourth quarter, which may lead to lower mortgage rates,” Charlie said.

Good mortgage supply should continue to fuel rising transactions, the main driver of RMI, which were up 15% in 2013 and 20% in 2014 to date, he adds.

Volution appoints Liberum Joint Corporate Broker

Volution Group plc (Ticker: FAN LN), a leading supplier of ventilation products to the residential construction market, has named Liberum as Joint Corporate Broker.

The company operates five key brands - Vent-Axia, Manrose, Fresh, PAX and inVENTer - and is focused primarily on the UK, Swedish and German ventilation markets. It has two divisions. The Ventilation Group principally supplies ventilation products for residential and commercial construction applications and Torin-Sifan supplies motors, fans and blowers.

The company sold approximately 20 million ventilation products and accessories in the financial year ended 31 July 2014.

In June 2014, Liberum acted as joint bookrunner on Volution’s £100m initial public offering on the London Stock Exchange. The IPO attracted a number of high-quality institutional investors, despite volatile market conditions for new issues.

Christopher Lewey joins Liberum as Head of Sponsor Coverage

24 September 2014 | People

Liberum has appointed Christopher Lewey as Head of Sponsor Coverage, adding 21 years of corporate finance experience gained at Close Brothers, Betfair and law firm Irwin Mitchell. He starts on 29 September 2009.

“Christopher will develop and manage Liberum's relationships with the private equity and venture capital community,” said Peter Tracey, Liberum’s Head of Investment Banking. “He has a track record that makes him perfect for this role, having experience of both advisory and client side work.”

Christopher qualified as a Chartered Accountant before moving to a corporate finance role with Rea Brothers in 1993 and subsequently became Head of Leisure and Retail in 2001 at Close Brothers Corporate Finance.

He joined Betfair in 2007, where he was responsible for M&A and new ventures. This role included management of Betfair's initial public offering in October 2010.

Christopher comes to Liberum from Irwin Mitchell, which he joined in May 2011, where he was again responsible for M&A strategy and execution as well as wider strategy development.

His appointment follows that of Anna Hartropp to the investment banking team at Liberum earlier in September, bringing nine years of FTSE100 and FTSE250 experience from Marks & Spencer, Cookson and, most recently, global technology company Laird PLC.

Liberum celebrated its seventh anniversary on September 10th and over that period it has played a role in 25 initial public offerings, most recently those of GAME Digital, Volution and P2P Global Investments.

Some £12.6 billion has been raised by Liberum and syndicates on behalf of companies and Topps Tiles and Photo-Me International are the most recent to join its roster of corporate clients.

Liberum provides research, sales, trading and corporate advice to European and North American institutional investors and companies. It covers more than 380 stocks that constitute 80% of the FTSE100 and 50% of FTSE250.

Tom Gadsby joins Liberum as Retail Analyst

23 September 2014 | People

Tom Gadsby is to join Liberum as a research analyst on September 29 to cover the Retail Sector.

He brings more than 18 years' markets experience including, most recently, nearly ten years at Societe Generale as both retail analyst - where he was highly ranked in the independent Extel Survey two years in a row - and retail specialist sales.

Prior to that, Tom worked for Wiliams de Broe, also as a retail analyst, where corporate clients included Majestic Wine and Laura Ashley, and Buchanan Communications advising companies on corporate transactions.

Tom was educated at Winchester College, Durham University and the Royal Military Academy, Sandhurst after which he spent five years as an infantry officer in the Royal Gurkha Rifles.

The survey, carried out among 1,022 participants in July and August, also explored how British consumers feel about cuts in local authority spending - affordable housing a preferred focus here - and monitors changes in how they expect their personal spending to change in a time of rising interest rates (a greater willingness to cut back on fags, booze and fuel).

Voters were subtantially more likely to vote for cuts to VAT - marginally ahead of spending on elderly care - than defence or high-speed rail.

The full survey is available to professional investors and media from the Liberum Media team led by Ian Whittaker. Email the team here >>

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